In PennEast Pipeline Company, LLC v. New Jersey, the Supreme Court of the United States (SCOTUS) defended the federal government’s ability to delegate its eminent domain power to a natural gas company. No. 19-1039, 2021 WL 2653262, (U.S. June 29, 2021).
The Natural Gas Act (“NGA”) was passed by Congress in 1938 to regulate the sale and transportation of natural gas across state lines. NGA requires a natural gas company to obtain a certificate from the Federal Energy Regulatory Commission (“FERC”) in order to build an interstate gas pipeline. The certificate reflects that construction of the pipeline “is or will be required by the present or future public convenience and necessity.” 15 U.S.C. § 717f(e).
Until amended, certificate holders were left with an illusory right to build because the NGA did not provide a mechanism for the natural gas companies to secure the property rights necessary to construct an interstate pipeline. In 1947, Congress amended this defect in the NGA by “authoriz[ing] certificate holders to exercise the federal eminent domain power, thereby ensuring that certificates of public convenience and necessity could be given effect.” PennEast, 2021 WL 2653262, at *1 (citing § 717f(h)).
PennEast Pipeline Company (“PennEast”) obtained federal approval to construct 116 miles of pipeline from Pennsylvania to New Jersey. After receiving the FERC certificate, PennEast filed complaints, pursuant to the NGA, seeking to condemn and gain immediate access to properties along the route of the scheduled pipeline. Forty-two (42) of the properties were owned by the State of New Jersey or the New Jersey Conservation Foundation. New Jersey moved to dismiss PennEast’s complaints on sovereign immunity grounds. The Federal District Court in New Jersey denied the motion to dismiss and granted PennEast’s orders of condemnation.
The Third Circuit reversed the District Court’s holding. The Third Circuit held PennEast was not authorized to condemn New Jersey’s property. The Third Circuit made a distinction between two powers. It stated the federal government’s eminent domain power was separate from its exemption from Eleventh Amendment Immunity. “The Eleventh Amendment recognizes that States enjoy sovereign immunity from suits by private parties in federal court [and] New Jersey ha[d] not consented to PennEast’s condemnation suits, so those legal proceedings can go forward only if they are not barred by the State’s immunity.” In re PennEast Pipeline Co., LLC, 938 F.3d 96, 99 (3d Cir. 2019), as amended (Sept. 11, 2019), as amended (Sept. 19, 2019), cert. granted sub nom. PennEast Pipeline Co., LLC v. New Jersey, 141 S. Ct. 1289, 209 L. Ed. 2d 22 (2021), and rev’d and remanded sub nom. PennEast Pipeline Co., LLC v. New Jersey, No. 19-1039, 2021 WL 2653262 (U.S. June 29, 2021).
The Third Circuit held PennEast could not condemn New Jersey’s property because New Jersey’s sovereign immunity under the Eleventh Amendment had not been abrogated by the NGA. The Third Circuit also stated the federal government could not delegate its Eleventh Amendment exemption to private parties.
PennEast argued the holding would reverse Congress’s intent when enacting the NGA and give States an unrestrained veto power over interstate pipelines. The Third Circuit recognized its holding would disrupt the operations of the natural gas industry. However, the Third Circuit clarified that interstate natural gas lines could proceed where an accountable federal official condemns the State property, then transfers the property to the natural gas company.
The United States Supreme Court disagreed. The Supreme Court held the U.S. government had essential power to appropriate property within the States, whether State or privately owned, for its own uses. See Kohl v. U.S., 91 U.S. 367, 368 (1875). The Court held this eminent domain right cannot be enlarged or diminished by the State. PennEast, 2021 WL 2653262, at *7 (citing Kohl, 91 U.S. at 374). The Supreme Court’s holding now allows PennEast and other natural gas companies holding a FERC certificate to condemn all necessary rights-of-way as allowed by the section 717f(h) of the NGA, whether state or privately owned